Environmental attributes, strategy-making comprehensiveness and firm performance

A key element that enables a firm to achieve better performance, the strategy-making process is of great interest to both researchers and practitioners. However, the bulk of past research has focused on the process alone and has reached few consistent conclusions. Recently, researchers have started to investigate the impact of crucial contingencies on strategy-:making. It appears this contingency approach is more fruitful in deepening and broadening our understanding of this critical area.

To continue the research in this direction, this study inquired into the linkage between the environment and the strategy-making process. A theoretical framework was developed after surveying the germane literature to guide the empirical analysis. Following this model, comprehensiveness, or the exhaustiveness and the inclusiveness in strategy-making, was selected as the key process attribute for this study. It was hypothesized that environmental complexity, or the number and heterogeneity of factors in the environment, and dynamism, or the degree of change, would impact the perceived uncertainty of the strategy maker, and further comprehensiveness in strategy-making. In addition, it was posited that the match between strategy-making comprehens1veness and environmental attributes would lead to better firm performance.

The computer industry served as the setting for this study. Questionnaires were mailed to top executives of randomly selected computer firms to obtain data on environmental attributes and strategy-making comprehensiveness. Secondary sources were used to acquire financial performance data and other background information.

Analysis results suggest that the proposed model is useful in understanding the environment and strategy-making interaction. Both environmental complexity and dynamism were found to influence strategy-making comprehensiveness. Moreover, the adaptation of strategy-making comprehensiveness to environmental attributes was found to lead to better firm performance. Findings from this study hold promise for effective strategic management and. contribute insight into the strategy-environment linkage.